The coronavirus pandemic produced the worst two-year period in aviation industry history. But despite this historic challenge, there are quite a few reasons to feel optimistic about the future.
In that spirit, and with the risks the industry faces still very much on our mind, we take a look at the ten biggest opportunities for aviation in the post-COVID era.
While the coronavirus pandemic has not officially been declared over, and frankly may not be for quite some time, but it no longer has the travel industry in its grip.
After two years of travel restrictions, cancelled plans, postponed events and intense longing to see family and friends, people desperately want to travel again. Ever since restrictions started easing, they’ve been doing so in huge numbers.
Pent-up travel demand has been strong enough to send passenger numbers on a steady increase despite a war in Ukraine, continued travel restrictions in China and a steady drumbeat of dreary global economic news.
Passenger numbers from the International Air Transport Association (IATA) from July 2022 showed that total travel demand, as measured by revenue passenger kilometres (RPKs), was up 59 percent over a year ago. This is largely driven by international demand, which increased by 151 percent in one year. Total global traffic is now at 74.6 percent of pre-crisis levels.
“July’s performance continued to be strong, with some markets approaching pre-COVID levels. And that is even with capacity constraints in parts of the world that were unprepared for the speed at which people returned to travel,” IATA Director General Willie Walsh said. "There is still more ground to recover, but this is an excellent sign as we head into the traditionally slower autumn and winter quarters in the Northern Hemisphere.”
Ticket prices are also significantly higher than before the crisis hit. US travellers, for example, paid 34 percent more for domestic travel and 2.5 percent more for international flights in summer 2022 than they did in 2019.
The rebound of global air travel has been strong enough to convince IATA that a full recovery can now be achieved by 2023, a full year earlier than previously expected.
The Satair Takeaway: Strong travel demand may not be the only thing that pushed airfares up over the summer travel season – rising fuel prices also played a key role – but the desire to make up for lost time is providing a desperately-need financial boost to airlines and the suppliers and repair shops that service them.
Even after all of those postponed travel plans get realized, major demographic and economic shifts are likely to ensure that global travel demand continues to expand.
Although stalled somewhat by the COVID-19 pandemic, the global population is gaining more discretionary income at a rapid clip. According to the 2021 Global Wealth Report from Credit Suisse, the global middle class tripled between 2000 and 2020, rising from 507 million adults to 1.7 billion. The report defines ‘middle class’ as adults who have assets valued at between $10,000 and $100,000.
Definitions differ, however. The OECD, for example, defines ‘middle class’ as those who earn between 75% and 200% of their median national income, while the World Data Lab applies the label to households in which per-capita spending is between $11 and $110 per day.
By any definition, though, the global middle class is expected to expand significantly over the coming decade. Thanks in large part to the economic growth in Asia, where one billion adults are expected to enter the category, the global middle class could be upwards of 5.3 billion by 2030.
This mass entry into the global middle class will have enormous humanitarian and health benefits as hundreds of millions of people get improved access to better diets and healthier ways of living.
From an aviation industry perspective, this demographic shift means an influx of new potential air travellers.
The Satair Takeaway: When hundreds of millions of people achieve new levels of discretionary income, they will also gain access to air travel that may have once seemed unattainable. According to a report from Nasdaq, when disposable income rises, so does spending on “transportation [...] vacations and other affordable luxuries”. In short, aviation's potential customer base is on track for a historic expansion in the coming years.
Spring and summer 2022 brought brutal heatwaves to various parts of the world, driving home the dangers of living on an increasingly warming planet and the urgent importance of transitioning away from fossil fuels.
This also naturally applies to the aviation sector, which accounts for roughly 2 percent of all global emissions. Bringing aviation emissions down is therefore a win-win that benefits both the planet and the industry.
IATA, which represents 290 airlines that account for over 80 percent of total air traffic, is well aware of this, which is why it has adopted a resolution to achieve net-zero carbon emissions by 2050. Aviation was the first sector to commit to an industry-wide carbon elimination scheme.
IATA’s net-zero plan calls for a combination of minimising the sector’s direct emissions at their source and using methods like carbon capture and the CORSIA offsetting scheme to make up the balance.
The emissions-cutting part relies heavily on the widespread adoption of sustainable aviation fuel (SAF), which is expected to account for 65 percent of the sector’s total fuel usage by 2050. The past year has seen some exciting developments. In December 2021, a United Airlines flight from Chicago to Washington DC became the world’s first passenger flight to use 100 percent SAF and three months later, Airbus performed a three-hour test flight of an A380 powered solely by SAF. But there’s still a long way to go. As of 2021, SAF accounted for less than one percent of all aviation fuel.
The industry’s biggest players are committed to greener solutions, with Boeing saying it will operate on 100 percent SAF by 2030, Airbus investing heavily in hydrogen, and major engine manufacturers competing to power the more sustainable aircraft of the future. Meanwhile, new startups are continuously coming up with new ideas for how to decarbonize aviation.
The Satair Takeaway: Taking an all-of-the-above approach to cut emissions is good for the industry. Fuel-efficient aircraft are cheaper for airlines to operate, especially in a time of historically high jet fuel prices, and the race to develop the greener aircraft of the future is spurring exciting innovation. (See Opportunity 4)
The search for more sustainable solutions is prompting some design innovations that could mean that the aircraft we board in 15 to 20 years will look quite different from those we fly today.
Airbus’s gambit on hydrogen-powered aircraft, for example, has the airframer working on a Blended-Wing Body ZEROe concept that looks like something out of science fiction.
The coming years could also see the first commercial supersonic flight since the Concorde was retired some 20 years ago. American Airlines announced in August that it had agreed to purchase 20 Overture airlines from the US start-up Boom Supersonic, with an option to buy 40 more. The Overture will carry up to 80 passengers and travel at Mach 1.7, twice the speed of any commercial aircraft flying today. American Airlines indicated that it could use its fleet of Overtures to fly more than 600 routes in as little as half the time they take today.
United Airlines has also purchased 15 Overture aircraft with an option to buy 35 more. Virgin Galactic and Lockheed Martin are also working on their own supersonic aircraft while Boeing and startups like Hermeus and Venus are trying to up the ante with hypersonic aircraft concepts that could carry passengers at five times the speed of sound within 20 to 30 years.
The high-profile failure of the Concorde naturally looms large over these various initiatives. While the fatal 2000 crash of Air France flight 4590 may have sealed the Concorde's fate, it was ultimately done in by its high costs to both passengers and airlines. With supersonic and hypersonic aircraft now back in vogue, there are still "some fundamental questions regarding the technical and economic viability of high-speed commercial air travel,” in the words of John Olds, the CEO of SpaceWorks, which has been tapped by NASA to study the technological and economic viability of high-speed commercial flight.
Among the other new innovations we could see in the skies are small passenger planes with diamond-shaped, propeller-lined wings, autonomous aircraft of varying shapes and sizes carrying both passengers and cargo (more on those in #6) and hydrogen-powered cargo aircraft that look like a futuristic rethinking of the zeppelin. And that’s to say nothing of the various ways airlines are rethinking their interior cabins or the ongoing race to develop the aircraft engine of the future.
The Satair Takeaway: A common criticism of aviation is that it is slower to innovate than other sectors. Whether that is fair or not is another issue, but the introduction of new and exciting aircraft and engines could go a long way toward attracting the bright minds and fresh ideas the industry needs.
Before we get to any of the futuristic aircraft described above, the global fleet will receive a more visually modest but sorely-needed update as older aircraft get retired and replaced by newer, more energy-efficient models.
Airlines have always periodically updated their fleets but many industry watchers expected that the COVID-19 downturn was going to unleash a “retirement tsunami”. That “tsunami” turned out to be more like a ripple thanks in large part to government bailouts. The 677 commercial aircraft retired in the pandemic-plagued 2020 were fewer than those retired in 2019 and well below the 803 put out of service in 2016. Only 344 aircraft were retired in 2021, representing just 1.4 percent of the global fleet.
Nevertheless, airlines are expected to accelerate the updating of their fleets in the coming years, with Aviation Week predicting an average of 1,000 retirements per year between 2025 and 2031. Much of this is driven by the fact that next-gen aircraft are typically 15-20 percent more fuel-efficient than their predecessors.
Plans for future fleet renewals are reflected in the order books of the two main airframers, Airbus and Boeing. According to Reuters, the two manufacturers saw three times as many gross orders in 2021 than the year before.
The Satair Takeaway: Just as the oil crisis of the 1970s spurred aircraft retirements, today’s rising jet fuel prices give airlines a financial incentive to replace older fuel-guzzling models with more efficient ones. Delta, for example, said that the 52 next-generation aircraft that it purchased in 2021 helped it save 22.5 million gallons of fuel. Some airports also offer discounted charges to airlines that renew their fleets with more fuel-efficient models.
For decades now, flying cars have been held up as the ultimate symbol of a future tech utopia. And while we’re not quite there yet, we are getting awfully close.
The advancements in urban air mobility (UAM) and advanced air mobility (AAM) vehicles in the past few years have almost created an entirely new industry within an industry. UAM and AAM vehicles will soon have their own aviation transportation system that may simultaneously co-exist with, compete with and ultimately be absorbed by today’s commercial aviation sector.
Recent years have seen the emergence of numerous startups developing vertical take-off and landing (eVTOL) and electric short take-off and landing (eSTOL) vehicles, both of the manned and unmanned variety. Exactly who will come to dominate this emerging market remains unclear, but startups including Vertical Aerospace, Joby, SkyDrive, Eve, Electra, and Volocopter, to name just a few, are all vying to be the first to make the world envisioned by The Jetsons become a reality.
Investors are certainly bullish about the future of UAM and AAM. According to Roland Berger, investments in AAM startups reached $7.5 billion in 2021, an eight-fold increase over the $913 billion invested just two years prior. The consultancy reports that some 8,700 air mobility aircraft orders had been ordered as of January 2022.
The Satair Takeaway: The Roland Berger report estimates that the UAM passenger industry will generate revenues of nearly $90B per year by 2050, a 60 percent increase over what it predicted just a few years ago. New startups may emerge as the dominant players in the UAM and AAM revolution or their early success could spur the established players to pursue aggressive mergers and acquisitions strategies to ensure they remain at the head of this exciting new chapter in air travel.
Keeping with our “the future is now” theme, we are also entering into an era of advanced robotics.
The use of robotics within the maintenance, repair and overhaul (MRO) sector has been a hot topic for several years now and the greater efficiencies that they could introduce are particularly promising when seen in the light of the sector’s labour shortage.
As we reported back in 2019, MRO robotics are already being applied to everything from single parts repairs and carbon fibre machining to intricate inspection tasks.
Robotics and automation also represent an excellent opportunity for warehouses to increase their speed and efficiency, logistical improvements that will also benefit the aviation supply chain.
Robots have also been used for cleaning aircraft exteriors and airports for some years now, but the coronavirus pandemic accelerated their wider adoption and introduced robots that can clean and disinfect aircraft cabins.
The Satair Takeaway: We may not be on the verge of robots crowding humans out of aviation, but the smart use of robotic technology is almost certain to expand in the coming years. Operators, manufacturers MROs and suppliers will all be able to find ways to streamline their operations and cut costs as robotic technology expands and matures.
Digitalisation has so steadily crept its way into the modern travel experience that we rarely stop to think how far we’ve come.
Today, most of us book a ticket using any of the countless services that can crawl the web for the best possible deal. Upon arrival at the airport, we check our bags at a self-help kiosk. At the gate, we pull up our digital boarding passes and proof of vaccination on our phones, scan them on a reader and head into the aircraft. In our seats, we have a world of entertainment at our fingertips via sophisticated in-flight systems and if we don’t like what we find there, we can connect to the onboard internet on our own devices.
All of this is now so commonplace that we can hardly remember travelling another way.
Digital innovations don’t just benefit the passenger, however. The steady march toward connected aircraft allows for the sophisticated capture of real-time data that, when combined with machine learning, helps operators lower their fuel consumption, increase their airspace capacity and ensure more efficient routes.
In the aftermarket and MRO sectors, continued advances in predictive maintenance will further minimize unexpected maintenance events that can cause expensive AOG time.
Buyers and sellers of aircraft parts are also taking advantage of digital marketplaces that cut down on paperwork and time-consuming manual processes. For buyers, digital solutions like the Satair Marketplace allow for easy access to new and surplus parts as well as used serviceable material (USM) that come with a digital paper trail showing certification and repairs. Sellers, meanwhile, can more easily monetize their surplus material, greatly expand their customer base and increase their overall sales.
The Satair Takeaway: Predicting future technologies is tricky, but one thing that can be said with near certainty is that every aspect of aviation will get more digital in the coming years. Some of that will be improvements on what we already see today, but there are also likely to be innovations that are currently unimaginable but destined to be as commonplace as our digital boarding passes. Just like with robotics, these digital innovations will cut costs and increase efficiencies throughout the aerospace industry.
The 2021-22 global supply chain crisis has caused shortages of everything from beer and vegetables to computer chips and building materials. The crisis is also directly impacting aviation, with parts like engine components, wire connectors and electronics, as well as vital raw materials like aluminium and titanium, getting harder to come by. It’s a problem that threatens to stop the industry’s recovery in its tracks.
But the supply chain crisis may also ultimately lead to more localised solutions that are less vulnerable to geopolitical events like war, national border restrictions and international trade disputes.
In a report advocating the end of aviation’s “global for local” supply chain model, Roland Berger suggests that the existing system “is no longer robust enough”.
“The aerospace supply chain is at the dawn of a significant transformation,” the report states. “Growing pressures such as geopolitics and sustainability are calling current global supply-chain setups into question, requiring OEMs and suppliers to take action.”
Rather than relying on sourcing needed parts and components from far-flung locations, it suggests the establishment of two “local for local” supply chains to serve North America and Europe, respectively, with the potential of a third localised supply chain centred around China.
The Satair Takeaway: Transitioning to an entirely new model will not be easy. But the Roland Berger report says that some of the very opportunities we discuss in this article – namely automation, next-gen aircraft and the push for sustainability – will make more localised supply chains economically viable in the next 10-15 years. But, as the report suggests, the time for aerospace companies to start decentralising and diversifying their supply chains is now.
Sprinkled throughout this article have been the names of aerospace startups that are trying to make their mark in an industry that the head of an aviation incubator programme told us was “a very closed shop” controlled by a handful of dominant players.
The company that cracks the code for the widespread adoption of SAF, builds the dominant air taxi of the future or carries passengers over the Atlantic in a matter of hours may be toiling away under the radar. Or maybe the OEMs, the major engine manufacturers and the biggest commercial airlines will leverage their structural advantages to be the first ones to achieve these milestones and others.
The fact is, we just don’t know which companies will dominate the future. But an influx of new companies and new ideas can only be good for the aviation industry.
The Satair Takeaway: Opening up the ‘closed shop’ also opens up opportunities for aerospace players both old and new. Like any sector, aviation needs constant innovation. Much of that is likely to come from some of the established players that have been pushing the industry forward for decades, but we also need startups that are willing to try wild new things, learn from their failings and move us all forward.
These are what we see as the ten biggest opportunities as aviation moves past the COVID-19 pandemic and into the new normal. But there are always two sides to every story so be sure to also check out our article on the ten biggest risks and challenges facing the industry.
Join our newsletter
This blog is driven by Satair Marketing & Communication with input from both internal and external contributors.
Satair is a world leading provider of aftermarket services and solutions for the civil aerospace industry. Satair is a stand-alone company and Airbus subsidiary.